Somehow, I love watching both of these guys. Incredibly, I end up agreeing with both of them at times. Either way, Jon Stewart is both incredibly smart and hilarious.
Here is the full, unedited interview thanks to Fox News.
*source: foxnews.com
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Somehow, I love watching both of these guys. Incredibly, I end up agreeing with both of them at times. Either way, Jon Stewart is both incredibly smart and hilarious. Here is the full, unedited interview thanks to Fox News. *source: foxnews.com From Michael comes a great TED speech by Sendhil Mullainathan on how to use behavioral marketing to solve our real problems. It jumps around a bit with interesting examples, but the idea all comes together toward the end, so watch the whole thing. I do not see how it can get any better. Let me explain using rough numbers. Obama’s budget for 2011 calls for $3.8 trillion in spending, with only $2.3 trillion in revenue (ie. taxes). The current GDP is roughly $14.5 trillion. Thus, we will have a deficit of $1.5 trillion for 2001, or 10.6% of GDP. The deficit for 2009 and 2010 are on roughly similar levels. To get a sense of how ugly that is, let’s look at one of the ugliest charts I’ve ever seen.
Yes, that clearly shows how not only our spending increasing massively, but the amount we are bringing in decreasing quickly. This new budget does not plan to tighten that gap next year. However, the budget does plan to bring the deficit down from 10.6% of GDP to only 3% by 2015. How? Close our eyes and pray. “Economic recover alone is expected to reduce the deficit-to-GDP ratio to 5% by 2015,” said White House Budget Director Peter Orszag. So, it’s like the housing market, where we are just hoping it will go back up and everything will take care of itself?! OH FUCK. The budget cuts and tax increases are getting the headlines, but it really means nothing. The over-hyped bank tax on the front pages is supposed to raise $90 billion over 10 years. That is $9 billion per year, or roughly an impact on the deficit of 0.06% of the GDP. Well, maybe the economy will recover and we’ll all be saved. Please explain to me how that can happen? Who’s Gonna Pay For ItOver the past year, the Federal Reserve bought roughly $1.2 trillion in mortgages, part of a plan to support the housing market. Effectively, that buying financed the US government fiscal deficit, albeit indirectly. As John Mauldin explains,
Unfortunately (or, rather, fortunately), the Fed is just about done buying mortgages. Their program officially ends in March, meaning from then on, someone else has to buy the extra $1.2 trillion in federal debt, not counting the growing state and local debt. As Bill Gross explains, the Fed’s mortgage buying, and in effect deficit covering, was behind the markets rally in 2009.
To cover the deficit this year, the US government needs about 8% of the GDP from other sources, primarily it’s citizens. “That means that consumers and businesses will have to save an additional 8% of GDP just to finance federal government debt,” John Mauldin explains. Considering most individuals balance sheets, I do not see that coming from new savings. Which means it has to come from somewhere else. Expect the stock market and other high risk markets to drop this year as we as a nation reallocate our savings into government bonds. Real Estate Double Dip to BeginLastly, let’s look at the other side of the Federal Reserve coin. Their program to stop buying mortgages will not only hurt the Treasury, but also the real estate market. Over the past 2 years, the US home mortgage market has been nationalized without anyone noticing. The Fed now owns $1.25 trillion in mortgages that it bought off of banks and funds. In the meantime, almost all new loans are being made by the government. As Andy Miller explains in an interview with David Galland of The Casey Report,
In other words, more forms of government bonds, of which virtual financing is drying up as the Fed stops their mortgage purchases (remember, the Fed bought mortgages from people who turned around and bought government debt, such as these). There is now no natural buyer of nationwide home mortgages. Add the massive market supply and percentage of homes underwater, and we realize the real estate market is in still grave trouble. CRE’s Turn to CrashIt is not just the housing market, either. The commercial real estate bomb is about to drop. Andy Miller believes it will come during the second quarter of 2010.
Thus the banks are back where they began. Free from writing down problem mortgages and allowed to lend without any capital usage. The Big, Scary PictureSo, let’s take a step back and look at this from afar. We have a deficit of $1.5 trillion for 2009, 2010, budgeted for 2011, and “planned” to slowly decline from there going forward. The Fed covered most of that deficit in 2009, but will be stopping soon. Meanwhile, the mortgage market has been nationalized. The mortgage financing must come from somewhere, and it is not coming from the Fed after March. The government will try to sell bonds, but we do not know who will buy them any more. We have a deficit that we will struggle pay for and mortgages for which our government will soon lack financing. How do we get out of this? Well, we cross our fingers and hope that the economy will recover, according to Obama’s Budget. If the economy grows, so will our tax revenues. In the meantime, our government will avoid cleaning up any existing risk. First, the Fed bought $1.2 trillion in mortgages to buoy the real estate market and bank industry and prevent true clearings of either market. At the same time, the FDIC is allowing banks to continue to hold risky assets without marking them down, thus preventing them from failing and letting the market clear. This is a ticking time bomb that is growing with each misstep. Personally, I hope the bomb goes off in the second quarter of 2010. We need to begin to go through the pain (as they are in Colorado Springs) or or the bomb will continue to grow. Can we make it through to 2015 or 2020 with steady economic growth that will pay for all of our problems? Yes, but the odds are massively against us. I’d prefer not to bet on Optimism at this point. The main risk is that nothing clears this year or the next and we have a gigantic bomb go off in 2013 or 2014 from which we cannot recover. This is scary as hell and I am not embarrassed to admit it. The rumors have been swirling for a couple months now about Apple potentially teaming up with Verizon to launch a iPhone on the Verizon network. What I would like to know is how many people would that benefit? First, if you already have an AT&T iPhone, would you switch to a Verizon iPhone? Second, if you have been waiting to get an iPhone because you hate the AT&T network, would the Verizon network incentivize you to get one? |
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